New reverse mortgage lending requirements take effect in Louisiana on August 15, 2010 according to an alert from Patton Boggs.
Signed into law by Governor Bobby Jindal on June 22, the Louisiana S.A.F.E. Residential Mortgage Lending Act is being amended to prohibit any form of prepayment penalty at any time on a reverse mortgage loan. The bill also requires that any reverse mortgage loan that provides for periodic advances to a borrower may not have such advances reduced in amount or number in the event of the adjustment of an interest rate.
The provisions included in Louisiana House Bill 1468 also limit the ability of a reverse mortgage to become due and payable.
“A borrower’s temporary absence from his or her home that does not exceed 60 consecutive days may not cause the mortgage to become due and payable,” says Patton Boggs. “Similarly, if the borrower takes prior action to secure and protect his or her home in a manner acceptable to the lender, an extended absence that exceeds 60 consecutive days but which is less than one year will not cause a mortgage to become due and payable.”
The bill also includes a provision which requires that the first page of any mortgage securing a reverse mortgage loan include “This mortgage secures a reverse mortgage loan” in 10-point boldface type.
Also, in connection with reverse mortgage loans other than those offered under or intended to be insured by the Federal Housing Administration, a reverse mortgage lender must provide the borrower with a term sheet or commitment letter at least seven calendar days prior to closing that outlines the proposed terms of the loan and that informs the borrower that such individual is not required to proceed with the loan transaction.